Five AI quirks and conundrums to watch this earnings season
QQQ•AI-related stocks accounted for 75% of S&P 500 returns, 80% of earnings growth and 90% of capital spending growth since ChatGPT launched in November 2022. The article highlights tensions around AI financing, CoreWeave, token spending, electricity supply and the revenue needed to justify investment.
1. Stocks and debt diverge
AI-related shares have mostly continued to rise while bonds issued to finance AI investment have weakened. CoreWeave’s shares are down 13% this year, while its October 2031 bond has fallen more than 20% since its April launch and trades below 80 cents on the dollar. Credit default swap spreads have recently reached record highs for AI borrowers including CoreWeave, Oracle, Amazon, Alphabet and Meta.
2. Conflicting signals on demand
Analysts disagree sharply on CoreWeave: HSBC forecast average returns through 2030 below the company’s cost of borrowing and set a $39 target price, while Goldman Sachs raised its recommendation to “buy” and set a $106 target. Token usage continues to rise, but spending growth is slowing as token prices fall. Morgan Stanley analysts estimate US data center developers face a 30% to 40% power shortfall through 2028, equivalent to 34% of total chip demand.
3. Revenue hurdle for AI
McKinsey and S&P Global estimate the six largest US hyperscalers will spend more than $7 trillion on data centers and other AI-related capital expenditure from 2025 through 2030. Columbia University's Stijn Van Nieuwerburgh estimates annual AI revenue would need to reach around $3.55 trillion by 2032 to generate a 10% return on the buildout; some analysts put the required figure above $4 trillion.
